OSC orders Sino-Forest executives to resign

Posted Date:
8/25/2011

[Toronto]— The Ontario Securities Commission (OSC), Canada's top securities regulator, slapped a 15 day cease-trading order on Sino-Forest Corp. today and ordered the company's top executives to resign, saying the forestry company allegedly misled the public by misrepresenting some of its timber holdings.

The company's stock has declined 72 percent this year since allegations of questionable accounting by U.S.-based short seller Muddy Waters LLC surfaced. Sino-Forest denied the allegations, including that it fraudulently exaggerated its tree-plantation assets.

Sino-Forest and certain officers and directors "appear to have misrepresented some of its revenue and/or exaggerated some of its timber holdings by providing information to the public which may have been false or misleading," the OSC said in its order.

It also said Sino-Forest "through its subsidiaries, appears to have engaged in significant non-arm's length transactions which may have been contrary to Ontario securities laws and the public interest."

The OSC ordered the resignations of Allen Chan, chairman and chief executive; Albert Ip, the head of development and operations; Alfred Hung, the head of corporate planning and banking; George Ho, vice president, finance; and Simon Yeung, vice president of operations. They are also prohibited from acting as directors or officers of other public companies, said the OSC

Early last week, Sino-Forest announced an independent committee looking into allegations of questionable accounting practices at the company will likely take longer than initially expected to complete its report due to data-collection challenges.

Standard & Poor's Ratings Service downgraded Sino-Forest following the news, saying it expects the company's operations will be hurt for a longer-than-expected period because of the extended investigation, adding it believes the company's financial strength is likely to weaken further.